Britain’s EU referendum: Cameron cannot please two audiences any longer

David Cameron kicked off the renegotiation of Britain’s EU membership at the European Council in Brussels. The modesty of his demands for reform will inevitably lead him into a breach with Conservative eurosceptics.

For some time, David Cameron has been trying to satisfy two very different audiences on Britain’s renegotiation with the EU. One is the Conservative eurosceptics. Many of them argue that he cannot achieve radical reform without making ambitious demands and threatening to recommend a ‘No’ vote unless he is satisfied. The other audience, the EU’s leaders, say they will give Cameron more help if he speaks softly and keeps his demands within the realm of the possible.

When Cameron kicked off the renegotiation at the European Council in Brussels, over dinner on Thursday night, it became clear that he will work broadly within parameters that are acceptable to his fellow leaders. British officials briefed that the government understood the EU treaties cannot be changed before a referendum. That has been pretty obvious for a long time to anyone who understands the EU’s rules on treaty change, or who talks to other EU governments, but not to all Conservative eurosceptics. As more of them come to realise that Cameron’s ambitions on EU reform are in fact quite modest, they will prepare to attack him. He is reaching the stage where he can no longer appeal to both audiences.

At the European Council, there was not a lot of time to talk about the British question. The EU’s leaders were busy with Mediterranean boat-people and the increasing danger that Greece may leave the euro. But Cameron managed to outline the broad headings of his demands for reform, repeating much of what he had already said on a recent tour of European capitals. The others listened politely and there was no substantive discussion. EU leaders asked the secretariat of the Council of Ministers to work with UK officials on the details of their proposals. Cameron hopes to clinch a final deal in December – allowing a referendum on membership to be held in 2016, probably in the autumn.

Some governments grumble that Cameron has not yet been specific on his ideas for reform. The Germans, however, think this is tactically wise. As soon as his list of demands is known, eurosceptics will attack him for a lack of ambition, while integrationists in other capitals will cry “impossible”, and he will lay himself open to the prospect of failure. Cameron may say very little on specifics until shortly before the December summit.

In recent weeks I have spoken to some of those who met Cameron on his European tour. They told me they were concerned about Cameron’s ability to navigate the many obstacles that he will face between now and the referendum. In particular, they wondered whether he regards Conservative party unity as more important than winning the referendum. They noted his recent about-turns under pressure from anti-EU Tories – on whether ministers would have to support his line in the campaign, and whether the civil service could take sides. But Cameron has a justification for these shifts: if he can retain the support of moderate eurosceptics – so that no more than, say, 50 Tory MPs back ‘Brexit’ – he is more likely to win the referendum.

Other EU governments want to see Cameron make the case for membership, which to them means taking on the eurosceptics and making enemies in his party. Some of them told me that only when he does that will they believe he is determined to prevent Brexit, and therefore worth negotiating with on a serious basis. But Cameron will not want to make the case in Britain until he has struck a deal in Europe. In the meantime, if he can convince other leaders that he will – as he said in his 2013 Bloomberg speech – fight to keep Britain in the EU “with all my heart and soul”, they will probably do business with him.

EU leaders worry that domestic politics may blow Cameron off course. Will Conservative backbenchers push him to demand reforms that are unattainable, thereby making it hard for him to claim a successful outcome? So far he has not asked for much that his partners regard as ridiculous, except for the idea that EU migrants should be denied benefits until they have lived in the UK for four years. Will he carry the cut-and-thrust of Westminster politics – focused on victory and defeat – into EU councils, which usually work towards careful compromises that offer something for everybody? Other leaders claim that if Cameron threatens them they are less likely to help. But some of them are already resigned to the December summit being the scene of a ferocious battle from which Cameron plans to emerge blood-stained but victorious.

If Cameron wants to win the referendum, he will have to upset some Tories & admit that the EU is good for Britain

Cameron’s task is that much harder because he has few friends in other EU capitals. His peers view him as a ‘transactional’ politician who is a skilled negotiator on particular issues but fails to invest in long-term relationships. For example, some Italians thought it odd that when he met Prime Minister Matteo Renzi in Milan earlier this month, asking for help on EU reform, he would not offer to take a single Mediterranean refugee. But Cameron’s recent European tour suggests, at least, that he sees the need to deploy some gentlemanly charm on his peers.

Chancellor Angela Merkel of Germany, the most influential EU leader, likes Cameron, but they have several times misunderstood each other (as in December 2011, when he refused to sign a treaty on fiscal discipline because she rejected a Treasury protocol that would have given the City of London some extra protection). Her officials have warned the British not to assume that she can fix the rest of the EU; 26 other governments, plus the European Commission and Parliament, also matter. One senior German told me that, though he thought Brexit would be damaging, allowing the UK to undermine the EU’s core principles – for example by disregarding rules on freedom of movement or non-discrimination – would be even worse for Europe.

Though the Germans share Cameron’s desire for a more competitive EU economy, they disagree with many other UK priorities. They oppose turning the ‘yellow card’ procedure – through which national parliaments can club together to ask the Commission to withdraw a draft law – into a ‘red card’, because they do not want to make it harder for the EU to legislate. They are hostile to Cameron’s desire for mechanisms to protect the single market against the risk of the eurozone imposing decisions on it, pointing out that the eurozone has never caucused; they suggest that what the British are really after is a veto for the City of London over financial rules. As for Cameron’s priority of preventing EU migrants from claiming in-work benefits such as tax credits, the Germans cite treaty articles banning discrimination on grounds of nationality. They point out that not only Poland and the other Central European states, but also countries like Spain would never agree to amend these articles.

Merkel’s advisers predict that she will ‘lead from behind’ during the British renegotiation, allowing Donald Tusk, the president of the European Council, to broker agreements among governments, while Jean-Claude Juncker, the Commission president, prepares relevant legislation. In dealing with the crises in Ukraine and Greece, Merkel has kept France’s President François Hollande at her side – to minimise the impression of German dominance and ensure that he is supportive. She will similarly enlist Hollande on the British question.

The final deal that Cameron obtains will mix EU-wide reform with UK-specific provisions. The mechanisms for delivering change will be varied: declarations and decisions of the European Council, as well as legislation and promises to amend the EU treaties at some unspecified point in the future. Those amendments will not happen any time soon. Most leaders view re-opening the treaties as a mad idea – nobody knows where the process would end, and several countries would have to hold their own referendums.

As for substance, Cameron will probably win an accord on ‘competitiveness’ that covers extending the single market, negotiating more trade agreements with other parts of the world and curbing unnecessary EU red tape (in fact the Commission is already doing these). He may get something on restricting immigrants’ rights to unemployment benefits, but nothing on tax credits unless the UK changes its own rules (for example, by introducing a residency qualification that applies to everyone, Britons included). He might win a treaty article promising to protect the single market, and an ‘emergency brake’ enabling any government to delay – but not stop – a decision that it thought damaged the market. On the treaties’ commitment to ‘ever closer union’, the British are unlikely to gain a full opt out, but words will be found to reassure them. The yellow card procedure could be beefed up so that national parliaments can more easily object to draft EU laws.

None of this will change the fundamentals of how the EU works. If Cameron tries to claim the contrary he will sound unconvincing. Besides, the essence of the campaign will be about whether Britain is better off in or out. Cameron likes the mantra that Britain should stay “in a reformed EU”, as it helps him to keep much of his party together. But if he wants to win the referendum, he will have to upset some Tories and admit that the EU per se is good for Britain. If he tries to keep both audiences happy, he will fail.

Charles Grant is director of the Centre for European Reform. An earlier and shorter version of this article appeared in the Observer on June 21st.